China prepares for shale gas auction

BEIJING, July 16 (UPI) -- More than 70 companies have indicated interest in participating in China's second tender for shale gas blocks, says China's Ministry of Land and Resources.

While the government hasn't announced a specific date for the auction -- it is expected in the next two months -- Jiang Xinmin, deputy director of the Energy Research Institute, a think tank of the National Development and Reform Commission, estimates that about 17 blocks will be on offer, China Daily newspaper reports.

That compares with four blocks from the first round of auctions last June, in which China Petroleum and Chemical Corp and a provincial coalbed methane company each secured two blocks.

China has 25.08 trillion cubic meters of exploitable onshore shale-gas reserves, said the Chinese Ministry of Land and Resources in March. As part of its current 5-year economic plan, China aims to produce 6.5 billion cubic meters of shale gas a year by the end of 2015.

"Shale gas development is a 'revolution' to increase domestic gas supply, improve the energy mixture and protect energy security," Wang Yuqin, board secretary of privately held natural gas pipeline operator Guanghui Energy Co., was quoted as saying by the newspaper.

Wang said Guanghui "will definitely" apply for this shale auction, adding that the government has the final say "on whether we can squeeze in."

While state-run news agency Xinhua in May said that more than 200 domestic companies had registered for the upcoming auction, China's Ministry of Land and Resources later said that figure was "greatly exaggerated."

Except for an agreement between Royal Dutch Shell and China National Petroleum Corp. to develop shale gas blocks in the southwestern province of Sichuan, Beijing has excluded foreign firms from participating, Energy Tribune reports.

But a recent report from London's Global Data Ltd. cites numerous challenges facing shale development in China, including the geology of the reserves, the country's water shortages, inadequate pipeline infrastructure, government control over natural gas prices as well as environmental issues.

Liu Yijun, a professor with the China University of Petroleum, told Xinhua that China's shale gas development is still in a "primary stage and has a long way to go toward mass commercial use."

Last month, Liu Tienan, deputy head of the National Development and Reform Commission, called for China to speed up mass production of shale gas with its own technologies to ensure adequate energy supply.

United Press International is a leading provider of news, photos and information to millions of readers around the globe via UPI.com and its licensing services.

With a history of reliable reporting dating back to 1907, today's UPI is a credible source for the most important stories of the day, continually updated - a one-stop site for U.S. and world news, as well as entertainment, trends, science, health and stunning photography. UPI also provides insightful reports on key topics of geopolitical importance, including energy and security.

A Spanish version of the site reaches millions of readers in Latin America and beyond.

UPI was founded in 1907 by E.W. Scripps as the United Press (UP). It became known as UPI after a merger with the International News Service in 1958, which was founded in 1909 by William Randolph Hearst. Today, UPI is owned by News World Communications.